Friday, February 6, 2009

Globalization - what it really means

How have US workers fared during the Bush/Clinton years? Did they see their living standards increase in real terms?

This chart tracks real compensation per hour in US manufacturing. In effect, it is the wage rate adjusted for inflation.

In many respects, it is a shocking data series. Since 1992, US wages in manufacturing increased by a little over 20 percent. Moreover, virtually all that increase was during the second Clinton adminstration. During the Bush years, wages were basically flat.

Globalization was the cause of stagnant US wage rates. US firms had to compete with lower paid Chinese workers. Higher US wages would have killed off US manufacturing completely.

How did US workers afford those Chinese made 42 inch Plasma TVs? Debt.